Charles River Laboratories International Inc. (CRL) reported second quarter 2012 earnings (excluding special items) of 75 cents per share, beating the Zacks Consensus Estimate of 67 cents. Earnings were 7.1% above the year-ago earnings of 70 cents. Earnings were boosted by a lower share count.
The company’s quarterly net sales of $284.7 million decreased 1.2% year over year. Negative currency movement impacted revenues by 3.1% in the second quarter of 2012. Net sales were below the Zacks Consensus Estimate of $287 million.
Quarter in Detail
Charles River operates through two segments – Research Models & Services (RMS) and Preclinical Services (PCS).
Revenue from the RMS segment was $173.6 million in the second quarter, down 2.6% from the prior-year period. Excluding the 3.8% loss from currency translations, RMS segment revenue inched up 1.2% year over year. On a sequential basis, revenues were down 5.2% due to lower research model sales in Europe and Japan and the negative currency impact.
Revenue from the PCS segment was $111.1 million in the second quarter, up 0.9% from the prior-year period (up 3.0% on constant currency basis). Sequentially, sales were up 8.1% driven by higher demand for biopharmaceutical services (BPS) and regulated safety assessment services.
During the second quarter of 2012, Charles River repurchased shares worth $15.3 million (approximately 458,000 shares) and has $88.5 million remaining under its $750 million repurchase program. The company expects to buy back 1 million – 2 million shares in 2012.
Outlook for 2012
Charles River trimmed its 2012 net sales guidance as it expects foreign exchange translations to negatively impact sales by 2% compared to 1% expected earlier. The year-over-year change in net sales is now expected in the range of -1% to 1% (previous guidance: 0% – 2%). The company maintained its net sales growth outlook on a constant currency basis in the range of 1% – 3%.
Charles River lifted its 2012 adjusted earnings guidance to $2.63–$2.73 per share (previous guidance: $2.60 –$2.70 per share). The Zacks Consensus Estimate of $2.68 per share is within the company’s guidance range.
The company expects seasonal factors to affect RMS segment sales in the latter half of the year, resulting in slightly lower sales compared to the first half. The company expects PCS segment sales to decline slightly in the remaining two quarters of 2012 as compared to the second quarter.
We currently have a Neutral recommendation on Charles River. The stock carries a Zacks #3 Rank, which translates into a short-term Hold rating.
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